[OPE-L:4191] RE: TSS transformation procedure

andrew klima (Andrew_Kliman@msn.com)
Wed, 12 Feb 1997 13:36:58 -0800 (PST)

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A reply to Allin's ope-l 4188.

He writes:

"1. I argued that the replacement cost of the means of production acquires
some relevance to the capitalists' calculations provided that the
inter-sectoral mobility of capital is less than perfect. Andrew hasn't
disputed this. Do I take it that he's willing to stake his argument on
perfect mobility?"

This is all too general. Let's re-focus on the specific issue at stake. The
objection to the equalized rate of profit in the TSS interpretation of Marx's
Ch. 9 transformation has been that competition tends to equalize the
replacement cost "profit rate," not the historical profit rate of the TSS
interpretation, and that the transformation should thus show an equalization
of replacement cost "profit rates."

Now, if there are barriers to entry and exit, then profit rates cannot be
equalized. Only when "perfect" capital mobility exists can they be equalized.
Hence, to posit an equalized rate of profit is to posit "perfect" capital
mobility. And hence, to require the equalization of replacement cost "profit
rates" is to presuppose that capitalists would seek to maximize their
replacement cost "profit rate" under conditions of "perfect" capital mobility.

We now know that that presupposition is false. They would seek to maximize
their expected historical cost profit rate. Replacement cost "profit rates"
are simply irrelevant under the conditions in which a uniform profit rate
could exist. Allin has tacitly admitted all this.

Hence, if a uniform profit rate is required, as it is for production prices to
exist, it is a uniform *historical cost* profit rate that is required. That's
the only uniform profit rate that is *possible*. And that's the one that we
show can be equalized, given nonstationary prices and the transformation of
values into production prices. Hence, the alleged problem, that we "fail" to
obtain a uniform replacement cost "profit rate," is a non-problem. Marx's own
transformation and its TSS interpretation are vindicated. No valid objection
to the internal coherence of Marx's transformation has
ever been made; all have been refuted. This should be acknowledged.
Unequivocally. In print.

These are the issues. They have NOTHING to do with whether "perfect" capital
mobility ACTUALLY EXISTS. If it does not (and it doesn't), profit rates are
not equalized (and they're not), commodities don't exchange at their
production prices (and they don't), and capitalists have to seek the highest
profit rate than can actually achieve, given the additional constraints they
face (such as inability to enter certain sectors and/or costs of transferring
capital from one sector to another). But again, that's not what is at issue
in the debate over the transformation. It is not a model of an ACTUAL
economy, with its actual rigidities and so forth. Its very PREMISE is a
uniform profit rate. And that requires "perfect" capital mobility.

As for the rest of Allin's post:

He writes: "Given Andrew's general insistence that accumulation or expansion
of value is all that matters to
capitalists ..." I've never insisted on this, because I don't believe it.
Taken literally, it would mean that capitalists would consume only the bare
minimum they need to survive, which isn't true.

Everything else in Allin's post is dealt with in my reply to Jerry that I
posted earlier today (Feb. 12).

Andrew Kliman